Payment into Court (Order XXIV)

Order XXIV of the Code of Civil Procedure, 1908 is one of the shortest Orders in the Code — four rules — but it occupies a distinct procedural slot. It permits the defendant in a suit for a debt or damages, at any stage, to deposit in court such sum of money as he considers a satisfaction in full of the claim. The plaintiff is then put to an election: accept the deposit and end the suit (or that part of the claim), or refuse it and continue. The mechanism is older than the Code itself — it descends from the English practice of payment into court, transplanted into Indian civil procedure to enable a defendant who concedes a portion of the claim to limit his exposure to interest and to cost orders.

For the judiciary aspirant, Order XXIV is a small but heavily examined block. The rule numbers are few, the limitation periods nil, but the procedural consequences — cessation of interest from the date of notice, the costs implications, the contrast with payment under a decree under Order XXI Rule 1 and with compromise under Order XXIII Rule 3 — recur in MCQs. The Order is also the conceptual ancestor of several conditional-deposit provisions scattered through the Code: the Order XXXVII Rule 5 leave-to-defend deposit, the Order IX Rule 13 "upon such terms as to costs, payment into court or otherwise" formula, and the security-for-costs framework of Order XXV.

Statutory anchor and scheme

Order XXIV contains four rules. Rule 1 enables the defendant, at any stage of the suit, to deposit in court such sum of money as he considers a satisfaction in full of the claim. Rule 2 requires notice of the deposit to be given through the court to the plaintiff. Rule 3 declares that no interest shall be allowed to the plaintiff on any sum deposited by the defendant from the date of receipt of the notice, whether the sum deposited is in full of the claim or falls short of it. Rule 4 provides the procedure for the plaintiff's acceptance or rejection: where the plaintiff accepts the sum so paid in as satisfaction in part of his claim, he may prosecute his suit for the balance; where he accepts it in satisfaction in full, he must present a statement to that effect and the court shall record it and pass judgment accordingly. In either case, the costs of the suit incurred up to the date of notice will be paid by the defendant, unless the court directs otherwise.

The Order is restricted by its own subject-matter. It applies only to suits for a debt or damages. It does not apply to suits for specific performance, for declaratory relief, for an injunction, or for the recovery of immovable property — those classes have no equivalent of "the sum claimed" against which a defendant's deposit can be measured. The Order is also confined to the trial stage of the original suit: payments under a decree once passed are governed by Order XXI on the procedure of execution, and adjustments out of court are governed by Order XXIII Rule 3. The discipline ties into the broader scheme of the Code as set out in the chapter on history, object and scheme of CPC: each procedural moment in a civil suit has its own statutory machinery, and Order XXIV occupies the slot between framing of issues and judgment.

Rule 1 — deposit by defendant

Rule 1 reads: "The defendant in any suit to recover a debt or damages may, at any stage of the suit, deposit in Court such sum of money as he considers a satisfaction in full of the claim." Three elements anchor the rule. First, the suit must be for a debt or damages — a liquidated or unliquidated money claim that can be answered with a deposit. Second, the deposit may be made at any stage of the suit, from the institution of the plaint up to the pronouncement of judgment. Third, the amount must be one the defendant considers a satisfaction in full — though the rule does not preclude the defendant from depositing a lesser sum, the deposit will then operate as a partial satisfaction under Rule 4.

The defendant's right under Rule 1 is unilateral. No leave of the court is required. No application is required. The defendant simply pays the sum into court — typically by challan or such other mode as the court permits — and triggers the notice requirement of Rule 2. The plaintiff has no power to refuse the deposit at the stage of receipt by the court; the only choice is whether to accept the deposit as satisfaction of the claim (in part or in full) or to refuse it and continue the suit. The framework parallels the doctrine in the chapter on admissions under Order XII: a defendant who admits a portion of the claim may limit his exposure by formal admission (Order XII Rule 4 or Rule 6) or by deposit (Order XXIV Rule 1) — the routes are alternative, the costs consequences differ.

Rule 2 — notice of deposit

Rule 2 requires that notice of the deposit shall be given through the court by the defendant to the plaintiff. The notice must specify the sum deposited and the head of the claim against which it is offered in satisfaction. The court is the conduit — the defendant cannot rely on personal service or out-of-court intimation; the notice is procedurally complete only when the court issues it to the plaintiff. The function of the notice is twofold. It triggers the cessation of interest under Rule 3 from the date the plaintiff receives the notice. And it crystallises the plaintiff's election under Rule 4: from the date of notice, the plaintiff is on terms to accept the deposit or to refuse it.

The notice requirement is symmetrical with the post-decree notice requirement in Order XXI Rule 1(2), inserted in 1976, which imposes a similar obligation on the judgment-debtor depositing the decretal amount to give notice to the decree-holder. The Supreme Court's reasoning in the post-decree context — M. Mathai v. Hindustan Organic Chemicals Ltd AIR 1995 SC 1572 and Industrial Credit and Development Syndicate v. Smithaben H. Patel AIR 1999 SC 1036 — that interest stops only from the date of service of the notice, not from the date of deposit, applies with equal force in the trial-stage Order XXIV setting. The deposit alone is not enough; the plaintiff must be informed before interest can stop running in his favour.

Rule 3 — cessation of interest

Rule 3 is the substantive incentive for the defendant to deposit. It declares that no interest shall be allowed to the plaintiff on any sum deposited by the defendant from the date of the receipt of the notice referred to in Rule 2, whether the sum deposited is in full of the claim or falls short thereof. Two limbs. First, the cut-off date is the receipt of the notice — not the date of deposit. The defendant who deposits and fails to ensure service of notice on the plaintiff continues to bear interest on the deposited sum. Second, the cessation operates whether the deposit is in full or in partial satisfaction — even a defendant who deposits less than the claim limits his interest exposure on the deposited portion.

The rule reflects a settled commercial logic: once the money is in court and the plaintiff knows of it, the plaintiff has the means to draw the sum in satisfaction of his claim. Continuing interest in such circumstances would penalise the defendant for the plaintiff's delay in accepting. The rule does not, however, freeze interest on the unpaid balance — if the defendant deposits less than the claim, interest continues to run on the shortfall until either further deposit or judgment. The doctrine is best understood as a partial settlement device: it converts the deposited portion into a non-interest-bearing fund held in court for the plaintiff's benefit while the parties continue to litigate the rest.

Rule 4 — acceptance, prosecution for the balance, and costs

Rule 4 is the election rule. Where the plaintiff accepts the sum deposited as satisfaction in part of his claim, he may prosecute his suit for the balance, and if the court is of opinion that he had no sufficient reason for refusing the deposited sum in satisfaction of his whole claim, he shall not be allowed costs incurred after the deposit, and shall pay the defendant's costs incurred from the date of deposit. Where the plaintiff accepts the sum in full satisfaction, he must present to the court a statement to that effect and the court shall record it and pass judgment accordingly. In either case, the costs of the suit incurred up to the date of notice are to be paid by the defendant, unless the court otherwise directs.

The costs consequence is the second arm of the incentive. A defendant who tenders a sum in satisfaction of the claim and is rejected by a plaintiff who eventually obtains a decree for no more than the deposited sum (or less) shifts the post-deposit costs to the plaintiff. The plaintiff who refuses a fair offer must therefore weigh the likely outcome against the post-deposit costs exposure. The mechanism is a soft compulsion to settle — without compelling settlement, it imposes a costs penalty on intransigence. The framework is a procedural cousin of the without-prejudice settlement letter in modern practice, formalised within the statutory scheme. The treatment of costs in connected proceedings is detailed in the chapter on judgment and decree under Section 33 and Order XX.

Distinction from Order XXI Rule 1 — payment under a decree

Order XXIV Rule 1 must not be confused with Order XXI Rule 1, which governs payment by the judgment-debtor under a decree. Three differences are heavily examined. First, the stage: Order XXIV operates during the pendency of the original suit, before judgment; Order XXI operates after the decree, in execution. Second, the trigger: Order XXIV is a unilateral act of the defendant offering satisfaction; Order XXI is a discharge of an obligation crystallised by the decree. Third, the consequence: Order XXIV gives the plaintiff a choice (accept or continue); Order XXI is a payment that the decree-holder must accept, the only question being one of appropriation under the rule of interest-then-costs-then-principal that Gurpreet Singh v. Union of India (2006) 8 SCC 457 settled.

The notice requirement runs through both. Order XXIV Rule 2 requires notice through the court at the trial stage; Order XXI Rule 1(2), inserted in 1976, requires notice at the execution stage. In both, interest stops from the date of service of notice, not from the date of deposit. The framework is symmetrical: the Code treats the deposit-and-notice mechanism as the universal procedural device by which a debtor crystallises payment for the purpose of stopping interest, irrespective of the stage of the proceeding.

Distinction from Order XXIII Rule 3 — compromise

Order XXIV Rule 1 is also distinct from compromise under Order XXIII Rule 3. A compromise is a bilateral agreement between the parties — the second part of Rule 3 ("satisfaction" by the defendant of the plaintiff) is the closest cousin, but even the satisfaction limb requires acceptance by the plaintiff before the court records it and passes a decree in terms. Order XXIV Rule 1, by contrast, is a unilateral act: the defendant deposits, the plaintiff is then put to election. If the plaintiff accepts in full, the result resembles a compromise — judgment is recorded in terms of the deposit. If the plaintiff accepts only in part, the suit continues for the balance. If the plaintiff rejects, the deposit remains in court pending judgment, but the cessation of interest under Rule 3 and the costs shift under Rule 4 still apply.

The interface with Order XXIII has practical consequences. A defendant who deposits under Order XXIV Rule 1 in respect of an amount that the plaintiff is willing to accept, and the parties then sign a written agreement embodying the acceptance, may convert the transaction into a compromise under Order XXIII Rule 3 — the resulting decree will then have the conclusive force of a compromise decree, including the operation of res judicata and the bar in Order XXIII Rule 3A against a separate suit to set it aside. A bare acceptance under Order XXIV Rule 4, without the writing-and-signature formality of Rule 3, leads only to judgment recording the satisfaction; it does not have the additional protections of a compromise decree.

Conditional deposits elsewhere in the Code

Order XXIV Rule 1 is the cleanest instance of payment into court, but the doctrine surfaces elsewhere in the Code in conditional form. Order IX Rule 13 — setting aside an ex parte decree — empowers the court to set aside the decree "upon such terms as to costs, payment into Court or otherwise as it thinks fit". The Supreme Court in interpreting that phrase has held the words "or otherwise" to be of wide amplitude — the court may impose any reasonable condition that secures the plaintiff against prejudice. The chapter on appearance and default procedure under Order IX works through that framework in detail.

Order XXXVII Rule 5 — the summary-suit leave-to-defend regime — empowers the trial judge to grant the defendant leave to defend on conditions, including payment into court. The Supreme Court has consistently held that conditions of payment into court should not be imposed where the defendant raises triable issues in good faith; conditions become appropriate only where the defence appears plausible but improbable, or where the trial judge entertains a doubt about the defendant's good faith. The interface with Order XXIV proper is one of pure procedural inheritance: the same conceptual device — money parked in court, awaiting outcome — performs different functions in different procedural settings. The framework is detailed in the chapter that will treat summary procedure under Order XXXVII.

Order XXV — security for costs — is the converse provision. Where the plaintiff is resident outside India or appears unlikely to be able to pay the defendant's costs if the suit fails, the court may order the plaintiff to give security for costs by depositing money or furnishing a bond. The deposit there is for the defendant's protection, not the defendant's offer in satisfaction. The procedural mechanics of holding funds in court are common to both, but the underlying purpose is opposite. The chapter on security for costs will treat Order XXV in detail.

Practice notes — manner of deposit, custody, and refund

The mechanics of deposit are handled by the rules of practice of each High Court rather than by Order XXIV itself. The deposit is typically made by challan in the treasury account of the court, accompanied by a memorandum identifying the suit, the defendant, the head of the claim, and the sum deposited. The court issues a receipt that becomes part of the suit record. Pending acceptance or rejection by the plaintiff, the sum is held in the court's deposit account; some High Courts permit interest-bearing fixed deposits with nominated banks under their own rules of practice. On acceptance by the plaintiff, the court orders disbursement to him, ordinarily by way of an order recorded in the proceedings. On rejection — that is, the plaintiff continues to prosecute the suit for the entire sum — the deposit remains in court and is appropriated against the eventual decree, if any, or refunded to the defendant on dismissal of the suit.

The deposit operates as a satisfaction pro tanto from the date of receipt of the notice by the plaintiff, irrespective of whether the plaintiff has expressly accepted it. Even if the plaintiff continues to prosecute the suit and ultimately obtains a decree, the decree must give credit for the deposited sum, and interest on the deposited portion stops from the date of the notice. The chapter on judgment and decree under Order XX works through the form in which a decree must record such credits.

MCQ angle and recurring distinctions

Three distinctions recur. First, the difference between Order XXIV Rule 1 (deposit during the suit, in respect of a debt or damages claim, unilateral) and Order XXIII Rule 3 (compromise of the suit, bilateral, requires writing and signature for the agreement-or-compromise limb). Second, the difference between Order XXIV Rule 1 (trial-stage deposit) and Order XXI Rule 1 (post-decree payment in execution). Third, the difference between Order XXIV (the defendant's unilateral offer of satisfaction) and Order XXV (security for costs, which is the plaintiff's obligation to deposit for the defendant's protection).

Two more points are exam-favourites. The cessation of interest under Rule 3 runs from the date of receipt of notice, not from the date of deposit — the defendant who deposits but fails to ensure service of notice continues to bear interest. And under Rule 4, the costs incurred up to the date of notice are payable by the defendant unless the court otherwise directs; costs incurred after the deposit may be visited on the plaintiff if he is found to have had no sufficient reason for refusing the deposit. Mastery of Order XXIV sets up the conditional-deposit framework that runs through Order IX Rule 13 on setting aside ex parte decrees, the security-for-costs regime of Order XXV, and the leave-to-defend conditions in Order XXXVII summary procedure — the same statutory device, deployed in different procedural windows.

One last point. Order XXIV does not lay down a limitation period of its own; the deposit may be made at any stage of the suit. The procedural posture from which the deposit is most often used in practice is after issues have been framed and before evidence is led, when the defendant has formed a view on the size of the likely decree and seeks to limit his costs and interest exposure. Once judgment is reserved the route closes — the defendant must then await the decree and discharge it through the post-decree machinery in execution. The window is therefore genuinely the trial window, and the strategic timing of the deposit is part of the practitioner's craft rather than a matter of statutory rule.

Frequently asked questions

Does payment into court under Order XXIV Rule 1 stop interest from the date of deposit or the date of notice?

From the date of receipt of the notice by the plaintiff, not the date of deposit. Order XXIV Rule 3 expressly says: "no interest shall be allowed to the plaintiff on any sum deposited by the defendant from the date of the receipt of such notice, whether the sum deposited is in full of the claim or falls short thereof". The Supreme Court in M. Mathai v. Hindustan Organic Chemicals Ltd AIR 1995 SC 1572, decided in the parallel context of Order XXI Rule 1(2), held that the cessation of interest takes place not by payment alone but from the date of service of the notice of deposit. The same reasoning applies to Order XXIV. A defendant who deposits but fails to ensure service of the Rule 2 notice continues to bear interest.

What kinds of suits attract Order XXIV?

Only suits to recover a debt or damages. Rule 1 is explicit: "The defendant in any suit to recover a debt or damages may, at any stage of the suit, deposit in Court such sum of money as he considers a satisfaction in full of the claim." The Order does not apply to suits for specific performance, declaratory relief, injunctions, recovery of immovable property, or partition — none of those have a "sum claimed" against which a defendant's deposit can be measured. Even within debt and damages suits, the deposit must be of money — the Order does not permit deposit of goods or other property in satisfaction. Where the defendant wishes to settle a non-money claim, the proper route is compromise under Order XXIII Rule 3.

What happens to the deposit if the plaintiff refuses to accept it?

The deposit remains in court pending judgment in the suit. The plaintiff is free to continue prosecuting the suit for the full claim. Two consequences nevertheless attach. First, interest on the deposited portion stops running in the plaintiff's favour from the date of receipt of the Rule 2 notice — Rule 3 makes the cessation operative whether or not the plaintiff accepts. Second, under Rule 4, if the court is of opinion that the plaintiff had no sufficient reason for refusing the sum in satisfaction of his whole claim and the eventual decree is for no more than the deposited sum, the plaintiff may be ordered to pay the defendant's costs from the date of deposit. The deposited sum itself is appropriated against the decree on judgment, or refunded to the defendant if the suit is dismissed.

How does Order XXIV Rule 1 differ from Order XXI Rule 1?

Three differences. First, the stage: Order XXIV applies during the pendency of the original suit, before judgment; Order XXI Rule 1 applies after the decree, in execution. Second, the trigger: Order XXIV is a unilateral offer by the defendant of a sum he considers satisfaction of the claim; Order XXI Rule 1 is the discharge of the obligation crystallised by the decree. Third, the consequence: under Order XXIV, the plaintiff has an election to accept or continue; under Order XXI, the decree-holder must accept the deposit, the only live question being one of appropriation under the rule that interest, then costs, then principal are paid first — Gurpreet Singh v. Union of India (2006) 8 SCC 457. Both Orders share the notice-stops-interest mechanism.

Is acceptance by the plaintiff under Order XXIV Rule 4 the same as a compromise decree under Order XXIII Rule 3?

No. Acceptance under Order XXIV Rule 4 leads to a judgment recording the satisfaction — partial or full — and disposing of the suit (or the relevant portion of the claim). It does not require the writing-and-signature formality of Order XXIII Rule 3 for the agreement-or-compromise limb. Where the parties want the additional protections of a compromise decree — including the conclusive force of res judicata and the bar in Order XXIII Rule 3A against a separate suit to set the decree aside — they must convert the Order XXIV transaction into a written compromise signed by the parties (or counsel) and apply for a decree under Order XXIII Rule 3. The judgment under Order XXIV Rule 4 is a regular adjudication, not a consent decree.

Can the defendant make a partial deposit under Order XXIV Rule 1?

Yes. Rule 1 speaks of a sum the defendant "considers a satisfaction in full" of the claim, but Rule 3 contemplates a sum that "falls short" of the full claim, and Rule 4 expressly provides for the plaintiff accepting the sum as satisfaction in part. A partial deposit attracts the same Rule 2 notice mechanism and the same cessation of interest under Rule 3 — but only on the deposited portion. Interest continues to run on the unpaid balance until further deposit or judgment. If the plaintiff accepts the partial deposit, he prosecutes the suit for the balance; the deposited sum is treated as satisfaction pro tanto. If the plaintiff rejects, the deposited sum remains in court and is appropriated against the eventual decree.